THE CLINTON TAX BILL

By DAVID E. ROSENBAUM,

Published: May 14, 1993

WASHINGTON, May 13—
President Clinton's plan to raise the taxes of almost all Americans in order to lower the Federal budget deficit passed its first big test in Congress today.

The House Ways and Means Committee, the first committee to get a crack at the tax measures, made some changes around the edges of the President's proposals but approved the main elements intact. The vote was 24 to 14, with all the Democrats in favor and all the Republicans opposed.

The legislation would raise taxes for individuals and businesses by a total of nearly $250 billion over the next five years, one of the largest tax increases in American history. Hurdles in Senate

The bill is almost certain to be passed the week after next by the full House of Representatives. But the outlook for the President's program in the Senate, where the Democratic majority is less solid than it is in the House, is much chancier. The final legislation could be quite different from what the committee approved today.

At the White House, George Stephanopoulos, Mr. Clinton's communications director, said, "The President is delighted that the Ways and Means Committee and all the other relevant committees were able to pass so much of his deficit reduction package in such a short period of time with so few changes."

Representative Dan Rostenkowski, the Illinois Democrat who heads the Ways and Means panel and a strong Clinton ally, called today's vote "the first step in deficit reduction." He added: "We've got a President in the White House that's leading, and we've got a Congress that's following." 2 Substantial Changes

His committee took the President's bill as a starting point and made only two substantial changes, both affecting businesses: it rejected his proposal for an investment tax credit for businesses, and it voted to raise the tax rate on corporate profits, now 34 percent, to 35 percent instead of 36 percent as the President requested.

The bulk of the higher taxes in the bill, as the President proposed, would fall on wealthy individuals. No one with with an income below $100,000 would get a higher income tax rate. But almost everyone would feel the effect.

For example, a new tax on fuel would cost a typical family, according to the Treasury Department's calculations, about $200 a year in larger utility bills and higher prices for gasoline and other products and services. The cost could be higher for families who drive long distances or live on farms.

The cost of the energy tax would be offset at least in part for workers earning less than about $30,000 by an expanded earned-income tax credit, which is a tax break for workers with lower incomes.

To win broader political support, the committee made small changes in the President's bill to give help to aluminum, agriculture and real-estate interests. But unlike tax bills of the past, this one does not appear to have any provisions that help a single company or individual.

"There is no intention of the chairman or anyone else to sneak something into this bill," Mr. Rostenkowski said.

The small changes in the Clinton program were made this week by the panel's Democratic members, meeting around a conference table in a closed room with the Republicans excluded.

When the full committee met in the open today, every seat in the largest hearing room on the House side of the Capitol was filled, and lobbyists lined the walls often two and three deep. After a staff explanation of the changes in the President's proposals, the committee voted to remove the lobbyists and reporters and met privately. G.O.P. Amendments Rejected

Then, Republicans offered seven amendments, including one that would have dropped the fuel tax. All were defeated on straight party-line votes in a process lasted less than an hour.

Representative Bill Archer of Texas, the top Republican on the committee, contended that "the biggest tax increase in the history of the world" was drafted behind closed doors.

But Mr. Rostenkowski observed that tax bills have almost always been handled that way, regardless of who was President or who was chairman of the Ways and Means Committee. He said he did not want his members to have to look to lobbyists in the audience for thumbs up or thumbs down signals before they spoke or voted.

The bill's biggest blow would be to the wealthiest taxpayers, who now face an income tax rate of 31 percent and Medicare taxes on only the first $130,000 of their earnings.

Under the measure, those with taxable incomes above $250,000, married or single, would be taxed at a top rate of 39.6 percent. Single taxpayers with taxable incomes from $115,000 to $250,000 and couples with taxable incomes from $140,000 to $250,000 would have a top rate of 36 percent.

In addition, high-income workers would have to pay the 1.45 percent Medicare tax on all their earnings.

The rate on capital gains would remain 28 percent. Some critics argue that the gap between the capital gains rate and the top tax rate could lead to the re-introduction of the kinds of tax shelters that Congress eliminated several years ago.